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fixed-income-securities

  1. Nicole Seaman

    YouTube T5-07: Risk-neutral probabilities

    One of the harder ideas in fixed income is risk-neutral probabilities. In this video, I'd like to specifically illustrate, and define, what we mean by risk-neutral probabilities. I will do this in three steps. The first one is just a simple example of a coin toss, where my objective is to...
  2. Nicole Seaman

    P1.T4.908. Interest rate factors and the DV01-based hedge (Tuckman Ch.4)

    Learning objectives: Describe an interest rate factor and identify common examples of interest rate factors. Define and compute the DV01 of a fixed income security given a change in yield and the resulting change in price. Calculate the face amount of bonds required to hedge an option position...
  3. Nicole Seaman

    P1.T4.901. Exploiting arbitrage opportunities with a replicating bond portfolio (also: clean versus dirty, and day-count conventions) (Tuckman Ch.1)

    Learning objectives: Construct a replicating portfolio using multiple fixed income securities to match the cash flows of a given fixed income security. Identify arbitrage opportunities for fixed income securities with certain cash flows. Differentiate between “clean” and “dirty” bond pricing and...
  4. Nicole Seaman

    P2.T5.715. Fixed-income portfolio mapping approaches (principal, duration, and cash-flow) (Jorion)

    Learning objective: Differentiate among the three methods of mapping portfolios of fixed income securities. Questions: 715.1. Consider a $200.00 million portfolio that is equally allocated between two bonds: the first bond pays a 5.0% annual coupon and matures in five years; the second bond...
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